The International Institute for Strategic Studies (IISS) raised its doubts on the same day Nuri al-Malaki separately assessed that Iraqi forces will be ready to take over from US-led coalition troops by November 2007.

"Numbers of US-trained government forces fighting the insurgency have continued to rise. However the speed with which the new Iraqi army and more particularly the police force have been built does raise problems," the report said.

"The rank and file of both forces are neither well enough trained to be fully effective on their own, nor sufficiently loyal to the national government to remain above the sectarian struggles gouging Iraq's sense of national identity.

"It is doubtful that a collective sense of Iraqi nationalism can survive in a context of increasing sectarian violence and the continuing security vacuum."

The comments came in a summary of the London-based IISS's report "The Military Balance 2006", which said the troubled Gulf state was at the centre of the global security and defence agenda along with Iran and Afghanistan.

IISS director John Chipman assessed that democracy has exacerbated religious and ethnic tensions in Iraq while there was continuing hostility to the country's new constitution and a divided ruling elite.

Political instability and a security vacuum persist in Iraq despite the formation of a new government of national unity. More violence, stoked by Islamist militancy, is likely to ensue as a result, it added.

"The five-month interregnum between the December elections and the formation of a government created a dangerous political vacuum that hastened Iraq's slide," Chipman said.

"The insurgency and sectarian violence are ultimately driven by the security vacuum that has dominated the country since the fall of the old regime in 2003.

"The result has been the growth of an insurgency estimated to have 20,000 fighters in its ranks that is increasingly motivated by a radical Islamist ideology."

Some 10 percent of the insurgents were thought to be from outside Iraq, typified by the Jordanian-born radical Abu Musab al-Zarqawi, and responsible for the most damaging sectarian violence, it added.

Given the precarious security situation and state of readiness of Iraqi forces, the IISS considered that national politics, conducted in parliament and around the Green Zone, will be dominated by an "escalating use of divisive sectarian rhetoric and zero-sum calculations".

"At a local level the population's lives will remain dependent on ad hoc local organisations to supply some modicum of security and predictability.

"It is in situations like these that sectarian and criminal militias tend to thrive."

On a regional level, the worsening security situation in Iraq had increased concerns among neighbouring states, prompting individual countries to forward their own interests and regional rivalries by supporting proxy groups in Iraq.

"The danger is clear: an increase in instability, violence and radical Islamism," it warned.

"The alternative would be a larger role for overt, co-ordinated, multilateral intervention, involving the key regional powers, to stabilise the situation."

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